The local industry was abuzz last month with news that Alrosa — the world’s largest diamond mining company by volume — was setting up shop in India with an office at Mumbai’s Bharat Diamond Bourse (BDB).
“For now, this shall only be a representative office, [aiming] to strengthen the client base in the country and also be in touch with our existing clients,” Jim Vimadalal, the former Rio Tinto executive who is spearheading the operations, told
Rapaport Magazine. “We shall be working with them to build up their portfolio based on their consumption capabilities.”
The new branch stems from the memorandum of understanding that the Russian miner signed with the Gem & Jewellery Export Promotion Council (GJEPC) last year, according to Evgeny Agureev, director of Alrosa’s United Selling Organization. Speaking at the press conference that followed the Mumbai office’s inauguration, he said that agreement was “backed at the highest level, with...further talks between our president and the prime minister of India.”
Though the location will not be a trade office, he continued, Alrosa is interested in understanding the Indian market. The move constitutes a new chapter in the miner’s relations with the country, Agureev said, adding that Alrosa was there for the long haul.
The new setup
With an executive assistant, an accountant and an office boy, Vimadalal has a small team. But Alrosa’s decision to open an India office in the first place hints that the miner has a long-term vision for the local market.
“With the Nirav Modi and Mehul Choksi scam deterring industry morale, what better time to enter India than now?” observed Vimadalal. “With our presence in India’s largest diamond bourse, we can maintain a close relationship with our existing customers and also keep tabs on the current and changing market dynamics, especially with regard to the growing threat of synthetic diamonds being witnessed in the industry.”
And it’s not just personnel Alrosa is bringing in, but technology as well. “Besides client servicing and procuring new clients, the office in Mumbai will also be home to the Alrosa Diamond Inspector — a diamond-detecting machine designed to overcome the challenge of mixing synthetic and natural diamonds,” Vimadalal continued. “Since this is just a representative office, the machine shall only be kept for display, but the industry players can of course come and test the machine if they wish to.”
The company also has plans to launch five major marketing campaigns in another two months, “all directed toward our own brand of diamonds,” he said. Besides touching on aspects like cut and color, the campaigns will focus on issues such as transparency and the history of diamonds. For now, Vimadalal and his team have no plans to open more offices in India, though he intends to travel to Surat once a month to meet with existing clients and rope in new ones.
Clearing tax hurdles
For its new contract period, which spans 2018 to 2020, Alrosa has signed 15 long-term contracts with Indian diamond manufacturers. It currently works with more than 140 Indian companies that buy diamonds from the spot market or auctions. During 2017, Alrosa supplied $700 million worth of rough diamonds directly to the country.
But whether or not Alrosa begins rough trading in India depends entirely on the government’s decision to bring down the direct trading tax rate.
“At the prevailing tax rate of 40%, it is not possible for us to begin...trading operations,” explained Vimadalal. “It is for the [GJEPC] to work with the government and sort out this challenge. [That said,] our number-one expectation is to soon change this representative office to a trading office once the conditions are favorable.”
By comparison, the rate for trading rough in other diamond hubs such as Hong Kong, Belgium, the US, the United Arab Emirates and Israel is only 0.56%. Vimadalal hinted that Alrosa was open to working with the council to support various initiatives that could help the industry.
One way or another, he made it clear that the company had no intention of starting mining operations in India. “We have many unexplored sites in Russia itself. For now, there are absolutely no plans to work with the government to explore sites in India.”
Article from the Rapaport Magazine - June 2018. To subscribe click here.